A judge on Wednesday unsealed a wide-ranging criminal case brought by the Justice Department against 18 individuals and companies accused of manipulating cryptocurrency markets and artificially inflating tokens. The operation targeted a multibillion-dollar cryptocurrency company and relied on a new FBI-created cryptocurrency scheme, according to the complaint.
The indictment marks the first time the Justice Department has brought criminal charges against a financial services company for manipulating virtual currency markets, after previously indicting Abraham Eisenberg. was convicted of a crime In April, he was accused of fraudulently manipulating a platform called Mango Markets.
However, the most notable feature of this case was the method used by the Federal Bureau of Investigation to arrest the defendants. The FBI took the “unprecedented step” of creating its own cryptocurrency tokens and fake companies to entrap suspected criminals, according to a statement from Jody Cohen, special agent in charge of the FBI's Boston office. It is said that he took it.
A century of planning
The cryptocurrency industry is no stranger to market manipulation. In market manipulation, the price of a token is often artificially influenced through practices such as wash trading, where participants disguise buy and sell orders to create demand. This practice is particularly widespread on offshore exchanges, where independent analysts exist. estimate That means more than 50% of the trades are inflated.
The Justice Department's lawsuit targets three market makers and their employees, who prosecutors allege provided wash trading services in exchange for payment. The indictment calls the investigation “the first of its kind,” but prosecutors say the pump-and-dump operation is “a centuries-old project.”
To uncover the operation, the FBI created a token called NexFundAI that runs on the Ethereum blockchain and eventually met with market makers to discuss adopting the service. One of the defendants referred to himself as the “mastermind” and explained that his company was using bots to buy and sell simultaneously on a centralized exchange to generate trading volume. Although they agreed to meet in person in September, they asked for a $2,000 advance payment. As of late last week, market maker bots were still making millions of dollars worth of wash trades before being shut down at the request of law enforcement.
According to crypto price tracker DEX Screener, NexFundAI remains actively trade The market capitalization is approximately $237,000.
Several of the defendants worked for Saitama, a cryptocurrency company founded in Massachusetts that manipulated token prices to generate a market value of $7.5 billion. Saitama worked with Gotbit, one of the alleged market makers, to artificially inflate the value of the token. The Department of Justice alleges that Saitama executives secretly made tens of millions of dollars in profits by selling tokens. In 2019, Gotbit co-founder said: coin desk He said his business was “completely unethical.”
Several of the defendants are active internationally, including in Portugal and Russia, and five have already pleaded guilty or agreed to plead guilty. Concurrent with the Justice Department's indictment, the Securities and Exchange Commission also filed a civil complaint alleging violations of securities laws in the market-making operations.
